In Shona we have a saying that goes something like "Kutaura seune kamuti mukanwa", loosely translated " Speaking as if you know what is going to happen" That is basically what happened with me this week when i spoke of impending corporate actions in the first quarter. Little did I know that OK one of my punts for 2010 was going to come out with an action of its own!

OK (one of the country retailers) is proposing to its shareholders the issuing of 5000 Convertible Loan Notes with a value of $5m, accompanied by a rights issue of 250,375,133 shares at a price of 6 cents a share to raise $15m. The detailed document is not yet out, so i cant really say much. Once I get it i will be able to say more. For now all i can say is we live in very interesting times. Nothing at all is what it seems. I didnt see this one coming but it all makes sense now.

When we talk about the Zimbabwean economy recovering it so easy to forget about where we are coming from and most importantly how desperate our companies are for capital injection. Infact we think companies are just going to start trading profitably without any investment! Although some companies are trading profitably, they are not where they used to be because over the years management focussed their attention to surviving rather than growing. It takes a radical shift in the mindset to take that leap of faith. Many companies are doing it because they have no choice, waiting will only increase the burden and chances of a total collapse.

When i see a rights issue from a company like OK, I see management that is looking ahead and trying to grow the company. Today OK has a market capitalisation on the ZSE of $50million. Injecting $20m will see the company easily double its current market cap. Not all shareholders will be able to follow their rights, that is the sad reality of our situation, on the other hand without recapitalisation the company which used to be the largest retailer in the country will be left behind if not forgoten forever. Its closest rival SPAR is opening new stores. New equity allows the company to restock its stores, refurbish or open new stores etc, thereby remaining relevant.

2010 is certainly a different year in many respects. Breaking with tradition, the tobacco selling season began today (16/02/2010, a whole two months before its normal date.) We need the cash man! Remember in Zimbabwe all tobacco must be purchased from off-shore funds. This is a direct injection of cash into our economy. Some curious statistic that i read is that last year's tobacco crop contributed 26% to the country's GDP. Last year only 42million kgs of tobacco was sold at an average price of $3.60 per kg, generating some $150m.

Those who read the papers last year will recall the number of stories about traders reporting brisk business as small-scale tobacco farmers bought anything they could lay their hands on with their cash. What was not bought! Cars,Fridges, Stoves, Generators, hoes, tractors, trailers, you name it! Many expect and with good reason too that there is going to be a replay of this again in 2010. The crop is expected to be around 77 million kgs and if we are to assume that prices average $3,60 again, the sale will generate close to $280 million. To put this into perspective that is over 70% of what was traded on the ZSE in 2009.

I spoke to a farmer yesterday who is still curing his tobacco. He welcomed the early opening of the auction floors because he would be able to liqiduate his loans earlier that usual, easing his interest burden. On the downside he pointed out that buyers would be slow in participating because they wanted a properly cured bale. So expect lower prices to start off with.

Just so you know, there a few stocks directly related to the size and fortunes of tobacco crop in Zimbabwe. These are TSL, HUNYANI, CHEMCO.